CBIC issues notifications and orders to give effect to the decisions taken in 31st GST Council meeting and issues clarificatory circulars

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1 from India Tax & Regulatory Services CBIC issues notifications and orders to give effect to the decisions taken in 31st GST Council meeting and issues clarificatory circulars January 9, 2019 In brief The Central Board of Indirect Taxes and Customs (CBIC) has issued various notifications and orders to give effect to the decisions taken at the 31 st GST Council meeting. CBIC also issued multiple circulars to clarify various issues. In detail The gist of the developments 1 are as follows Amendments introduced through removal of difficulty orders availing input tax credit (ITC) in respect of any invoice, where the supply has been made during financial year and the details of which have been uploaded by the supplier (by March, 2019), has been extended to the due date for furnishing the monthly return for the month of March, Further, suppliers are also allowed to rectify any error or omission in respect of details of outward supply disclosed earlier till the date of submission of return for the month of March, This is sought to be achieved by inserting 1 The alert does not cover the notifications making amendments relating to changes in rate of various provisos in section 16(4) and section 37(3) of CGST Act, (Order no. 2/2018-Central Tax dated 31 December, 2018) submission of annual return and reconciliation statement along with GST audit report has been extended to 30 June, (Order no. 3/2018-Central Tax dated 31 December, 2018) submission of monthly statement of tax collected at source by the electronic commerce operators for the months of October, November and December, 2018 has been extended to 31 January, goods and services. It only summarises the notifications/ circulars/ (Order no. 4/2018-Central Tax dated 31 December, 2018) Amendments which do not impact rate of tax submission of specified details for migration of the assessees into GST who did not complete the migration procedure has been extended to 31 January, (Notification no. 67/2018- submission of Form GSTR 3B for the period July, 2017 to February, 2019 for the newly migrated assessees has been extended to 31 March, Further, the due date for submission of Form GSTR 1 for orders, which clarify various aspects or amend any procedures/ law.

2 the (6) quarters July, 2017 to December, 2018 and for the (20) months July, 2017 to February, 2019 for such newly migrated assessees will be 31 March, (Notification nos /2018- Central Tax all dated 31 The provisions for deduction of tax at source under GST would not be applicable to supplies of goods and services between two persons when both are required to deduct tax. (Notification no. 73/2018- The GST Rules have been amended. The key amendments are as A person who is required to collect tax in a State, where it does not have a physical presence, can obtain registration in that State by mentioning the details of its principal place of business located in another state. The requirement of disclosure of challans in Form GST ITC 04, in case of the goods sent from one job worker to another, has been withdrawn. The requirement of affixing signature or digital signature on invoice or a bill of supply or consolidated invoice or any other document issued by an insurer or a banking company or financial institution, including nonbanking financial companies or ticket issued by a passenger transport company has been done away with, if the respective document is issued in accordance with the provisions of the Information Technology Act, For claiming refund of accumulated credit in case of inverted duty structure, the term relevant period has been defined to mean the same as for refund claim of accumulated credit by exporters, i.e. the period for which the claim has been filed. A new rule has been inserted to bar a person who has not filed returns for two consecutive periods from generation of e-way bills. This rule will be effective from a date yet to be notified. Forms GST RFD-01 (refund application), GST RFD-01A (refund application), GSTR 9 (annual return) and GSTR 9A (annual return) and GSTR 9C (reconciliation statement and GST audit report) have been substituted with revised formats. (Notification no. 74/2018- For the persons who have not submitted Form GSTR 1 (return for outward supplies) for the periods July, 2017 to September, 2018 who now submit Form GSTR 1 for these periods between 22 December, 2018 to 31 March, 2019, the late fee payable for such delay is waived. (Notification no. 75/2018- For delayed submission of Form GSTR 3B (periodical return) from the month of July, 2017 onwards, the late fee which is in excess of INR 25 per day (under CGST Act, 2017) has been waived. In case, Central GST payable under the return is nil, the late fee in excess of INR 10 per day (under Central GST Act, 2017) has been waived. Further, in cases where the returns in Form GSTR 3B for the period July, 2017 to September, 2018 has not been filed and is filed between 22 December, 2018 and 31 March, 2019 the late fee will be completely waived. (Notification no. 76/2018- For the persons who have not submitted Form GSTR 4 (return for composition dealers) for the periods July, 2017 to September, 2018 and submit Form GSTR 1 for these periods between 22 December, 2018 to 31 March, 2019 the late fee payable for such delay is waived. (Notification no. 77/2018- submission of Form ITC 04 (return for movement of goods to/ from job worker) for the period July, 2017 to December, 2018 has been extended to 31 March, (Notification no. 78/2018- The Integrated GST Rules, 2017 have been amended. The major amendments are as In case of advertisements over internet, the rules have been amended to provide a deeming fiction that such services are provided all over India. The value of supply of service attributable to different States, when the services are supplied/ performed in multiple States and a consolidated 2 pwc

3 consideration is charged without any break up for services supplied in an individual State, will be as Sr. No. Nature of supply Allocation of consideration 1 Services in relation to immovable property or stay/ organisation of function in hotels etc. or services ancillary to them. This will also be applicable in the cases, where the location of the service provider or the service recipient is outside India. 2 Services in relation to organisation of event or assigning of sponsorship to such events, when the services are supplied to an unregistered person and the event is held in multiple States. This will also be applicable in the cases, where the location of the service provider or the service recipient is outside India. 3 Supply of services relating to leased circuit, where the leased circuit is installed in multiple States. 4 Supply of services for goods which need to be physically made available by the service recipient to the provider, and the services are performed in multiple States and the location of the supplier or the recipient is outside India. 5 Services supplied to an individual, represented either as the recipient of services or person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, where the location of supplier or the location of recipient is outside India and the services are supplied in multiple States. Where such immovable properties etc. are located in multiple States, the services are deemed to be provided in all the States. The values would be allocated as For stay in hotels on the basis of nights stayed. For stay in houseboat or vessel in proportion of time spent by the boat or vessel in each State on the basis of declaration made by service provider. In case of all other services, including the services by way of accommodation for organisation of function etc. and also, in cases, where the stay is made in a hotel (which is single property located in two or more contiguous States), in proportion of the immovable property lying in each State. The value of service for each State shall be determined by application of the generally accepted accounting principles. The value of services for each State would be determined on the basis of number of points of the leased circuit in each State and the consideration split accordingly. If the services are provided on the same goods, the value of services would be equally divided between each of the States where the services are performed. Where the services are provided on different goods, the consideration would be split on the proportion of invoice value of goods in relation to which the services are performed. The value of the services in each State would be determined by applying generally accepted accounting principles. (Notification no. 4/2018-Integrated Tax dated 31 6 pwc

4 Circulars issued, clarifying various issues 2 A circular is issued, providing various topical clarifications. The key clarifications are as Penalty under section 73(11) of the Central GST Act, 2017 is not applicable in case of delayed filing of Form GSTR 3B returns as such penalty pertains to non-payment of tax. However, penalty for delayed payment of tax under section 125 of the Central GST Act, 2017 is applicable. In case of revision of prices, after the appointed date, of any goods or services supplied before the appointed day, which requires issuance of any supplementary invoice, debit note, credit note, the rate as per the provisions of the Central GST Act, 2017 will be applicable. The provisions of tax deduction at source under section 51 of the Central GST Act, 2017 are applicable only to such authority or board or any other body set up by an Act of Parliament or a State legislature or established by any Government in which 51% or more participation by way of equity or control is with the Government. Taxable value for the purposes of GST shall include the amount of tax collected at source (TCS) under the provisions of the Income-tax Act, 1961 since the value to be paid to the supplier by the buyer is inclusive of the TCS. (Circular no. 76/50/2018-GST dated 31 A circular is issued providing clarification on export of services in cases, where a service exporter has outsourced portion of the service contract to a person outside India. It has been clarified that: In such case, two supplies take place; one from Indian service exporter to the end client, and another from outsourced service provider to Indian service exporter. The Indian service exporter will be required to pay GST under reverse charge on services received from the outsourced service provider. If the full consideration for the services as per the contract is not received in convertible foreign exchange where the end client directly pays the outsourced service provider, even that portion of the consideration would be treated as receipt for exports if Reserve Bank of India has permitted retention of part of consideration outside India and the Indian service exporter has paid Integrated GST on consideration paid to outsourced service provider under reverse charge. (Circular no. 78/52/2018-GST dated 31 A circular is issued providing clarification on various issues relating to refund. The major clarifications are as While submitting the refund application, it was previously required that the copy of the refund application and the supporting documents were required to be physically submitted to the jurisdictional tax officer. Now such documents can be uploaded on the common portal. In case of refund of accumulated credit due to an inverted duty structure, the refund would be granted irrespective of applicable tax rates on the various inputs (whether higher or lower or equal to the rate applicable on output supply). The assessee would get interest on delayed refund on the refund amount immediately starting from the date after expiry of 60 days from the date of receipt of application (ARN) till the refund has been actually credited to the bank account of the claimant. Where the refund application has been electronically submitted and the ARN is generated on the common portal before the issuance of this circular but the application has not been received by the jurisdictional office (except refund of excess balance in electronic cash ledger), the refund claims of less than INR 1,000 should be rejected and the amount re-credited to the electronic credit ledger. In case of refund claims for amounts more than INR 1,000 the claimant should be sent an electronic mail communication to submit the application to the jurisdictional office within 2 Only the circulars having wider impact have been covered in this tax insight. 2 pwc

5 15 days of receipt of the mail, failing which, the refund application would be dismissed and the amount debited would be re-credited to the credit ledger. In case of refund applications of excess balance in electronic cash ledger, the amount debited in the electronic cash ledger may be re-credited if there are no liabilities in electronic liability register. The amount should be recredited, even though the return in Form GSTR 3B for the relevant period has not been filed. If an exporter, whose output does not attract compensation cess, has not claimed credit of compensation cess until May, 2018 and decides to avail credit of such compensation cess later and claims refund of such compensation cess in a single month in which the credit is claimed, the amount of refund would be recomputed as if the same was available in the months in which refund of accumulated credits due to exports has been claimed. The consignments exported on payment of Integrated GST in the past would not be eligible for such refund of compensation cess. The refund of compensation cess paid on inputs would be available, irrespective of whether the inputs are used to make an intermediate product (such as electricity), which is used to make the final product which is exported. In case of compensation cess paid on inputs used for domestic supply as well as exports, where the assessee only avails the credit of the portion of compensation cess attributable towards exports, the amount of credit claimed would be treated as total credit and the refund claim would be allowed of such amount in the proportion of exports. If the assessee avails the balance credit after reversing the initial entry writing off the proportionate ITC of cess, it can again claim the refund of such credit of cess and consequently, refund. (Restricted to amount of refund computed to be available, if the entire credit has been claimed initially). The credit of an invoice for previous period, which is claimed in subsequent period, should be considered for the purpose of computing eligible refund for the period for which such credit has been claimed. The credit of any inputs used in the business and for making taxable (including zero rated) supplies should be considered as net ITC for refund, and ITC claimed as inputs on items such as stores and spares (including charged off to revenue and not capitalised), packing materials, material purchased for machinery repairs, printing and stationery items should be considered for refund if such credit is otherwise eligible. The refund of tax paid on input services and capital goods would not be available in case of claim of refund of accumulated credit due to inverted duty structure. (Circular no. 79/53/2018-GST dated 31 A circular is issued, clarifying the applicable rate of tax and classification of various goods. Some salient clarifications are as LPG supplied in bulk, whether by refiner/ fractionator to OMC or by one OMC to another for bottling and further supply for domestic use will attract 5% with effect from 25 January, Concessional rate of GST on goods used for setting up of Waste to Energy Plants is available only on the goods covered under chapters 84, 85 and 94, and other products would not be eligible for the concessional rate of tax. Further, the supplier needs to satisfy himself with requisite document from the buyer before claiming concessional rate of tax. Any inter-state movement of goods for provision of service on own account by a service provider, where neither transfer of title in such goods nor transfer to a distinct person is involved, does not constitute a supply of such goods and it is clarified that any movement on own account would not be liable to GST. (Circular no. 80/54/2018-GST dated 31 A circular is issued clarifying that the services provided by International Finance Corporation and Asian Development Bank are exempt from GST in terms of International Finance Corporation (Status, Immunities and Privileges) Act, 1958 and Asian Development Bank Act, pwc

6 respectively. The exemption will be available only to the services provided by Asian Development Bank (ADB) and International Finance Corporation (IFC), and not to any entity appointed by or working on behalf of ADB or IFC. (Circular no. 83/02/2019-GST dated 1 January, 2019) A circular is issued, clarifying the issues relating to transactions between the banking companies and banking facilitators (BF)/ banking correspondents (BC). The clarifications are as Banking company provides services to the customers and is liable to pay GST on the entire value of service charge or fee charged to customers, whether or not received via BF/ BC. To avail exemption on services provided in relation to accounts in rural area branch, the applicable conditions in notification, i.e., the classification of services of BF/ BC in their respective individual capacity should be covered under the heading 9971, and the service should be with respect to accounts in a branch located in the rural area. The classification adopted by the bank as per the Reserve Bank of India guidelines in this regard should be accepted. (Circular no. 86/05/2019-GST dated 1 January, 2019) A circular is issued, clarifying the issues arising from Central GST (Amendment) Act, 2018 on section 140(1) of the Central GST Act, 2017 dealing with carry forward of credit balances. The clarifications are as The closing balance of CENVAT credit pertaining to service tax can be carried forward as the legislative intent was not to disallow transition CENVAT credit in the form of service tax. The expression eligible duties under section 140(1) of the Central GST Act, 2017 does not refer to the condition regarding goods in stock or to a condition regarding inputs and input services in transit. It has also been decided not to notify clauses 28(b)(i) and 28(c)(i) of the Central GST (Amendment) Act, 2018 (dealing with linking carry forward of closing balance of credits as per returns with various conditions) to avoid such linkage. The eligible duties which are allowed to be carried forward under section 140(1) of the Central GST Act, 2017 would only cover the duties listed as eligible duties in sr. nos. 1 to 7 of explanation 1 to section 140 of the Central GST Act, 2017 and eligible duties and taxes as listed in sr. nos. 1 to 8 of explanation 2 to section 140 of the Central GST Act, No transition credit of cesses, including cess collected as additional duty of customs under section 3(1) of the Customs Tariff Act, 1975 will be allowed. (Circular no. 87/06/2019-GST dated 2 January, 2019) The takeaways The Council had issued a number of amendments, some of which, were not announced at the time of the 31 st GST Council meeting. The amendment in Integrated GST Rules, determining the place of supply where a service straddles multiple States is prospective in nature and it would be interesting to see the approach adopted by the authorities for the past period. The further simplification of refund procedures, doing away with physical submission of application and various supporting documents is welcome, and will lead to reduction in procedural aspects. Parties claiming refund of compensation cess as exporters will need to review the classifications and their impact on past claims which are still unprocessed. Further, the clarifications regarding carry forward of CENVAT credit of service tax etc. clear the apprehension of the industry regarding potential challenge to carry forward of service tax credits etc. on the basis of language as drafted. However, the clarification prohibiting the carry forward of the credit of the cesses may see judicial challenge from the industry. Let s talk For a deeper discussion of how this issue might affect your business, please contact your local PwC advisor 6 pwc

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